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India’s Russian oil imports jumped to a nine-month high in April as partly impaired Russian refining capacity due to Ukrainian drone attacks nudged Moscow’s oil producers to push more discounted barrels for exports, according to vessel tracking data and industry watchers.
Notably, this surge in India’s imports of Russian crude came despite the latest round of sanctions by the United States (US) against Russia’s oil shipping syndicate, which had led to speculation that Indian refiners could turn extra cautious in taking deliveries. Trade sources, however, said that the sanctions at the most had a marginal and short-lived impact on Russian oil flows to India.
Indian refiners imported a total of 1.96 million barrels per day (bpd) of Russian crude oil in April, the highest since July of last year, and nearly 19 per cent higher than volumes imported in March, as per provisional ship-tracking data from commodity market analytics firm Kpler.
Russia accounted for 40.3 per cent of the total 4.86 million bpd of crude oil imported into India in April. This is the first instance in seven months of Moscow having a share of over 40 per cent in New Delhi’s oil imports. Russia’s share had declined to around 33 per cent in the past four months from the peak level of nearly 46 per cent seen in May 2023, the data shows.
“The first wave of Ukrainian drone strikes (on Russian refining infrastructure) in late January-early February has pushed (Russia’s) seaborne oil exports to 3.8 million bpd, so some 300,000 bpd higher than the 3.5 million bpd average of November 2023-February 2024. Not having the ability to refine that much domestically, Russia’s oil producers have exported those surpluses and consequently Indian buyers had more to buy from,” said Viktor Katona, head of crude analysis at Kpler.
The US has over the past few months sanctioned a number of vessels for evading the G7 price cap of $60 per barrel on Russian seaborne crude, apart from sanctioning a few fleet operators and vessel owners. Notably, Russia’s state-owned shipping major Sovcomflot and 14 related tankers were sanctioned by the US in the last week of February.
Following that, Indian refiners had started refusing deliveries on Sovcomflot tankers in an evident bid to steer clear of any secondary sanction risk. The pause, however, was short-lived as the Sovcomflot tankers have started discharging crude at Indian ports after India received more clarity on the scope of the latest sanctions.
According to industry insiders, Indian refiners are still avoiding tankers explicitly sanctioned by the US and its allies, but are not following any blanket ban on Sovcomflot tankers, as was the case initially after Washington announced the latest round of sanctions.
Ship tracking data shows that at least two Sovcomflot tankers discharged oil at Indian ports over the past week. To be sure, India buys Russian oil on a delivered basis, which means that the responsibility of arranging shipping and insurance for the cargoes rests with the Russian suppliers and Indian buyers have no liability on that count.
“Seemingly, even direct sanctions are not a problem, especially as Russia’s shipping and India’s maritime regulatory services start to align,” Katona said.
India’s shipping regulator last week approved a few Russian insurance firms for providing marine insurance cover to tankers. Using services of such insurers would ensure that the cargoes are not subject to the G7 price cap. The price cap regime was introduced in December 2022 and prohibits export of Russian seaborne crude at over $60 per barrel if the trade involves Western shipping or insurance services. Service providers in coalition countries are dominant players in the global shipping industry.
Supply of the medium-sour Urals crude—Russia’s flagship crude grade and the mainstay of India’s Russian oil purchases—to Indian refiners touched a record high in April at 1.54 million bpd, accounting for nearly 79 per cent of India’s Russian oil imports. Evidently, the price differential between Urals and competing crude grades from India’s traditional West Asian suppliers was significant enough for Indian refiners to prefer the Russian grade.
In April, India’s oil imports from Saudi Arabia fell to a seven-month low of 0.61 million bpd, which was 20.2 per cent lower than volumes imported in March. Similarly, April import volumes from Iraq were down by a fourth on a month-on-month basis at 0.88 million bpd.
Prior to the war in Ukraine, Iraq and Saudi Arabia were the top two suppliers of crude oil to India. But as the West started weaning itself off Russian energy supplies following Moscow’s February 2022 invasion of Ukraine, Russia started offering discounts on its crude and Indian refiners started snapping up the discounted barrels.
“Saudi Arabian oil imports into India are the lowest since September 2023, a testament to the fact that if Indian refiners can buy spot Urals cargoes at a discount of $4 per barrel to Brent (a global benchmark), they are bound to cut their nominations of Saudi crude which is generally $5-6/barrel more expensive,” Katona said.
As the world’s third-largest consumer of crude oil with a high import dependency level of over 85 per cent, India is extremely sensitive to oil prices. Although trade sources have indicated that discounts on Russian crude have shrunk considerably over the past months, Indian refiners have evidently remained keen on buying Russian oil as given the high import volumes, even lower discount levels lead to significant savings.
